Lira Weakens, Bonds Fall Before Central Bank Policy Decision

  • Dollar-lira pair holds just above 21-day moving average
  • Standard Chartered expects a 100-basis-point rate increase
Photographer: Kostas Tsironis/Bloomberg

Turkey’s lira weakened against the dollar and local-currency bonds declined as investors waited for the central bank to set interest rates later Thursday.

Analysts are divided on whether policy makers will hold the one-week repo rate steady at 16.5 percent, or hike. Nine of 17 surveyed by Bloomberg expect no change, with the others seeing at least a 50-basis-point increase. The decision is due at 2 p.m. Istanbul time.

Standard Chartered strategists expect the central bank to raise the rate by 100 basis points, as May’s emergency increase has only managed to contain currency weakness, which is not enough, they say, given the nation’s widening current-account deficit and deteriorating inflation outlook.

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The lira weakened as much as 0.5 percent to 4.5786 against the dollar, with the pair holding above its 21-day moving average of 4.5268. The yield on 10-year bonds climbed seven basis points to 15.28 percent, after touching a record-high 15.41 percent on Wednesday.

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